Uncertificated (Dematerialised) Securities

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Uncertificated (Dematerialised) Securities

• Dr Marcin Spyra

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Uncertificated securities

• Uncertificated Security means an obligation of
  an issuer or a share, participation, or other
  interest in an issuer or in property or an
  enterprise of an issuer
• a the transfer of which may be registered upon
  books maintained for that purpose by depositary
  institution or securities intermediary.

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National Depository for Securities

• An issuer of securities, before applying for the
  admission of financial instruments other than
  securities to trading on a regulated market or
  befor applying the admission of the public
  offering shall conclude with the National
  Depository for Securities an agreement on the
  registration of the securities in the depository
  for securities.
• In the case of State Treasury papers the
  securities may be also registered by the Polish
  National Bank

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Securities Intermediaries

• The purchase of the uncertificated securitiy
  requires the books entry on a securities account.
• An investor in order to purchase uncertificated
  securities must enter into a broker agreement
  with a securities intermediary (a broker-dealer
  or a bank)

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Book Entries

• The National Depository for Securities shall
  register securities in
• 1) deposit accounts, in the case of which the
  identification of the holder of the securities
• account in which such securities have been
  registered is not possible
• 2) securities accounts,
• 3) omnibus accounts.

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Omnibus Accounts

• Omnibus account is a securities account kept by
  a financial intermediary (investment firm) to
  debit on it securities belonging to other person
  than account-holder.
• Omnibus account may be held by, investment firm,
  depositary institution whether Polish or foreign.

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Depository System
KDPW Central Depository Institution
Investment Firm A
Investment Firm A
Investment Firm B
Sec. transfer 200
Investor B
Investor A
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Transfer of Uncertificated Securities

• Under an agreement on the transfer of
  dematerialised securities, such securities shall
  be transferred upon making a relevant entry in
  the securities account. In the event the record
  date as at which the holders of rights to
  benefits from dematerialised securities are
  determined falls on or after the date on which
  the transaction should be cleared at a depository
  for securities, and the securities continue to be
  registered in the transferors account, the
  benefits shall inure to the benefit of the
  transferee and shall accrue upon registering
  securities in the securities account of the
  transferee.

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Obligatory dematerialisation

• Securities which are
• 1) offered in a public offering or
• 2) admitted to trading on a regulated market, or
• 3) introduced to an multilateral trading
  facility, or
• 4) issued by the State Treasury or the National
  Bank of Poland
• shall exist in uncertificated form as of the
  date of their registration under the agreement on
  the registration of the securities in the
  securities depository (dematerialisation).

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Facultative dematerialisation

• Securities may exist in uncertificated form if
  permitted under separate regulations concerning
  the issue of such securities.
• This is the case by
• Bonds, Mortgage Bonds, Bank Securities,

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Facultative dematerialisation

• Securities which are
• 1) offered in a public offering but are not to be
  admitted to trading on a regulated market, or
• 2) introduced only to an multilateral trading
  facility
• do not have to undergo dematerialisation, if so
  determined by the issuer.

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• An issuers obligation to deliver securities
  shall be satisfied upon the receipt of such
  securities by the participant keeping a
  securities account for the entitled person, and
  an issuers obligation to make a cash payment
  shall be satisfied upon the transfer of the cash
  to the bank account indicated by such a
  participant.

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Dematerialised securities.

• There was 20.000 shares of the company X
  registered on the accounts of customers of a
  investment firm. C1 was entitled to 10.000
  shares, K2 and K3 to 5000 shares. An investment
  firm employee mistakenly entered into the system
  an order to sale 8000 shares of X. The order was
  allegedly made by K1. In fact none of the clients
  made an order to sale shares.
• What are the proprietary consequences of such an
  operation?